Securing a bank loan is the standard way of getting any new business ideas off the ground. The reality, however, is that many of us don’t have a strong enough credit rating for approval, or simply don’t want the stress of being in debt. There are, however, various alternative ways to inject money into a business, a few of which are highlighted below.
Merchant Cash Advance
Available from Boost Capital, merchant cash advance is a flexible funding solution. Self-described ‘champions of small businesses’, Boost allow fledgling companies to borrow anything from £3000 to £500,000. It works by arranging repayment as an affordable percentage of your business card’s takings. By allowing repayments to fluctuate as income goes up and down, it’s far more intuitive than a traditional loan. In essence, you only repay when you get paid, making it much easier to keep on top of your finances.
Angel investors are generally well-established business experts that are actively seeking to put their money into new and exciting start-ups. Because they want to invest and – to put it crassly – have the money to spare, they are often willing to hand over cash to those who who have been turned away by banks because their ventures have been deemed high risk.
In exchange for their investment, you will hand over an equity stake in your business, meaning they get their money back over time once you start making profit.
Crowdfunding works by accepting pledges from members of the public who like the look of your ideas. You put together a donations page, in which you can detail your plans and drum up support, sometimes offering recompense in the way of exclusive perks. Once you reach your financial goal, the money is transferred from each of your benefactors and you can get to work.
The beauty of crowdfunding is that aside from raising cash, it’s also a great way to get your name out there early. This means you already have an existing audience to target once you launch.
With family, there’s an instant level of trust you just can’t get elsewhere. Financial arrangements between loved ones can get messy though, so it’s important you always draw up a formal agreement. It’s crucial that all parties involved know exactly where they stand in terms of how much is being handed over, and if and when it will be repaid. This avoids any uncomfortable disputes later down the line.
The upside of turning to family is that they have an automatic personal stake in your business’s success, in that they want to see you do well. Unlike a bank, they will likely ask for little or no interest, and will be much more sympathetic to your financial ups and downs.